Buy Elecon Engineering Company Ltd For Target Rs. 681 By Sushil Finance
Elecon Engineering Ltd. recently announced its performance for the quarter ended December 31, 2025. Following are the key highlights.
Highlights from the Quarter (Q3 FY26)
Gear Division
Revenue: The gear division generated Rs.429 cr in Q3FY26, up 1% YoY. Gear accounted for ~76% of total revenue. The growth was flat on account of some order execution delays. However, the environment is gradually improving supported by investments in power, steel and sugar sectors.
Profitability: Gear EBIT was Rs.78 cr (vs. Rs.118 cr a year ago), with an EBIT margin of 18.2% in Q3FY26, down from 27.8% in Q3FY25. The margin decline was driven by higher employee costs, accelerated depreciation on recent capacity expansions, and a shift in product mix toward lower-margin catalog products. The company is executing an order for Navy for the 1 st time and is incurring expenses towards designing and manufacturing with minimal revenue, thereby impacting the margins
Commentary: Management noted that execution requests by the clients, held back some revenue to the tune of Rs.35-40cr, but a healthy backlog and improving demand for the products should enable conversion in the revenue in Q4FY26.
Material Handling Equipment (MHE) Division
Revenue: MHE revenue increased to Rs.123 cr in Q3FY26, up 16% YoY from Rs.105 cr in Q3FY25. Growth was broad?based, led by strong demand for new equipment and aftermarket spares in the cement, power, port and mining sectors
Profitability: MHE EBIT fell to Rs.25 cr (from Rs.33 cr in Q3FY25), with an EBIT margin of 20% versus 30% a year ago.
Order Book Q3 Order Intake: Total order intake in Q3FY26 were Rs.701 cr, up 7% YoY (versus ~Rs.654 cr in Q3FY25). Outstanding Order book as on Dec 2025 stands at Rs.1,372cr, as most of the end users have announced the capex to upgrade their equipmentslike gears and MHE.
Full-Year Guidance: Management has revised its FY26 revenue guidance downward by up to ~5% from the earlier guidance of Rs 2,650 cr. EBITDA margins are expected to be lower by up to ~2% compared to the earlier guidance of 24%.
Outlook & Valuation
We expect the company’s topline to grow at a CAGR of ~14% to Rs. 2,856 cr in FY24-27E. We view Elecon as a structurally strong play on India’s industrial capex and exports theme, with excellent financial health and execution capabilities. The investment thesis rests on: (1) sustained earnings growth of 13%+ CAGR driven by infrastructure-led demand, (2) margin stability at high levels due to operational excellence, (3) potential upside from export penetration by tie up with OEMs. We expect the PAT and EPS to be at Rs. 510 Cr and Rs. 22.7 respectively. We have assigned a P/E multiple of 30X to arrive at a price target of Rs. 681 which provides an upside of ~66% within 18 to 24 months from the current market price.
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